All applicants ask this question.

A very small minority have already made the choice before I meet with them. The may ask because they have never had a Home Loan before or because they have had a loan and feel they made a bad choice of interest rate type previously. Others have done well previously but have perceived that this time, the financial or employment environment is different.

The range of options are this; fix the whole loan OR have the whole loan variable OR choose a mixture of some of the loan on Fixed rate and some of the loan on variable rate. I have had some clients have some of their loan amount on fixed for say three years and some on fixed for maybe five years.

The truth is there is no one right way for all people for all seasons.

The accuracy of what is best, has as much to do with an individuals forecasting of the economic and interest rate cycle as it has to do with their forecast of future family and financial situations. Often over-arching that is how it makes them feel to be ‘locked in’ for a period of time on a fixed rate versus how it makes them feel to be ‘vulnerable’ to the vagaries of variable rates.

The best solution is to have a frank discussion with your mortgage broker where you gain from the brokers industry insight and combine that with your sentiment of hows things are now and how you think they will be over a period of time.

My current sage advice is summed up in these short sayings; “how things are now is not how they always will be” as well as “it was only two years ago when the popular interest rate sentiment was that rates would continue to ‘go through the roof’ yet it was only six months later that we experienced the lowest interest rates in over 40 years and now only nine months after that, that we have had three interest rates rises in 5 months”.

There has been some articles that have mentioned that borrowers who stay on a variable interest rate for the life of the loan term will pay less interest than those who choose to fix their interest rate. The benefit is obvious because people tend to ‘lock in’ out the emotion of fear, where those who choose (and stay) variable tenddo so out of an emotion of optimism. The risk of such a strategy is that it is easy to choose variable when rates are low(er) but when they get high(er), they then lock in on a rate that is higher again and thus commit to several years of high rates. Then if they do want to get out part way through that high rate period, they find they are in for multiple thousands of dollars in  penalties to break the fixed rate loan. Yes, that penalty can also apply if the borrower is selling and paying out the loan. 

Please email your specific scenario/request to me brad@admiralhomeloans.com.au

Many people mistakenly believe they have to save for a deposit before they can approach a lender for a home loan.
Worse still many think they first have to establish a credit rating before they can get their first home loan.

Buying a home can be easier and more affordable than many have been led to believe.

Brad Thrupp of Admiral Home Loans admitted that first home buyer applicants tend to be a couple that both work and have no children. Because they have 2 incomes they tend to be able to buy a great home and when they don’t have other personal loans and credit cards they can usually comfortably handle the payments.

When I met a young couple recently, they asked what are the costs involved with buying our first home (besides the actual purchase price).
I explained that the main costs included;
• Legal fees (actual professional costs for the solicitor advice and guidance as well as the various searches they do). Most firms have a set fee depending on which city/shire that you are buying in. Most clients would not go over budget if budgeted $1700 for legal costs.
• State Government fees. For most first home buyers, this will be about $800 to cover the cost of registration of the mortgage and registration of the title. There are extra fees if the purchase price is over $500,000.
• Bank fees. Most lenders have establishment/ application fees some don’t (but you will find that most lenders fees – by whatever name will be covered inside $1,000.
• Building and Pest inspection. Some companies do one or the other, but the easiest way to go is with the companies that do building AND pest inspections. Most service providers will do this for $450 to $600.
• Mortgage Insurance is by far the biggest outlay that first home buyers have to cover. Mortgage Insurance has a premium that is paid by the borrower essentially to protect the lender in case of default on the loan repayments. As most First Home Buyers will borrow 97% of the purchase price, the cost of the mortgage insurance will add up to as much as $10,000 (much more in some cases – it depends on how much you borrow and the % of the purchase price that you are borrowing). Some first home buyers don’t have to pay mortgage insurance. This happens when they have a friend or relative who also offer their home as extra security.

It is really amazing to see how people become more confident as the process unfolds. They start out just wanting to buy their own place, and then it grows into a learning experience of jargon, alternatives and deadlines, culminating to the big day when they get the keys.

The reasons many first home buyers manage to get into their own place is because they;
• become committed to their goal
• they ask lots of questions
• potentially can borrow up to 100% (110% in some cases) of the purchase price.
• First Home Owners Grant (FHOG) of $7,000 is a big help with some of the costs I spoke about earlier
• They don’t get put off by ‘doom and gloom’ articles in the media

First Home Buyers can also be First Home ‘BUILDERS’.
Yes, lenders will still finance construction and the government will still give them the FHOG.

A young couple I know are expecting their 2nd child soon. They are building what will be their first house. They have a new game they play called the “daily drive by”. They go to the site every day to see where the builders are up to. The builders don’t mind if they come in and have a look around and take an interest in how it all takes shape and becomes their home on handover day.

I met a guy the other day who said he recently read that the best time to buy was 25 years ago. The next best time to buy is now. That is what I call a timeless statement.

Enjoy looking for your first home and don’t forget, the best place to start is;
• ask your Mortgage Broker how much you can borrow and
• what the repayments are that will suit you.

The next day I was ‘bowled over’ when I ordered a Frappe at Gloria Jeans café at Kippa-Ring. I had not been into the store in at least 6 weeks. The girl who took my order was pleasant. She asked the right questions and did her job well.
What made the experience fantastic was instead of asking what name to put on the order, she asked, that order will be in the name of Brad won’t it? She had remembered my name even though I didn’t even remember her.
I immediately responded with, “If I owned a coffee shop, I would certainly want you serving the customers”. Again, this fabulous service didn’t cost the company any extra and it certainly didn’t cost me any extra. But now I am happy to tell the world about my experience and that has to be good for anyones business.

We specialise in assisting First Home Buyers through the whole process using a step by step approach.

The realities of the modern lifestyle in the new millenium has increased the demand for debt consolidation and refinance which is something we deal with on a daily basis.

A consultative approach is the way in which we approach every clients needs.

This is borne out by the debt reduction tips that are passed onto our clients as a complimentary gesture.

After all we understand that OWNING your property is what the great Australian dream is about.

Contact Brad Thrupp brad@admiralhomeloans.com.au